UK-Singapore DTAA:
Tax Treaty Guide with Examples
This guide explains the key provisions of the Singapore–UK Double Taxation Avoidance Agreement (DTAA) in simple terms. It is intended for:
- Singapore-based individuals or businesses earning income in the UK, and
- UK-based individuals or businesses with income from Singapore
We break down how specific types of income, such as business profits, dividends, capital gains, and more, are taxed under the DTAA, and illustrate the application with practical examples using 2025 tax assumptions.
If you're an entrepreneur from the UK planning to launch a business in Singapore, you may also want to check out our how to register a Singapore company.
This article covers the following topics of the Singapore-UK DTAA:
- Purpose & Scope of the Agreement
- Key Terms
- Tax on Business Profits
- Tax on Dividends
- Tax on Interest Income
- Tax on Royalties
- Tax on Personal Services
- Tax on Director Fee
- Elimination of Double Taxation
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UK-Singapore DTAA: Purpose & Scope
The main goal of the Singapore–UK Double Taxation Avoidance Agreement is to eliminate the risk of double taxation on income and capital gains that arise when a person or entity operates in both countries. The treaty also aims to prevent fiscal evasion, particularly through base erosion and profit shifting strategies.
By allocating taxing rights between Singapore and the UK, the DTAA provides greater clarity and certainty for cross-border taxpayers. This promotes investment, trade, and the smooth movement of people and capital between the two nations.
Who Is Covered
The UK–Singapore DTAA applies to "persons who are residents of one or both of the Contracting States". This includes:
- Individuals who are tax residents of either Singapore or the UK,
- Companies and other legal entities that are tax residents in either country.
What Is Covered
The treaty governs a wide range of income types, such as business profits, dividends, interest, royalties, capital gains, employment income, consulting fees, and directors’ remuneration.
When analysing the provisions of the DTAA, it is important to understand the key features of the Singapore tax system. This includes the core principles of Singapore corporate tax, which determine how companies are taxed on both local and foreign income, as well as the rules governing individual taxation, which vary based on residency and income source. It's also essential to consider the specific treatment of foreign-sourced income, as this affects how and when tax relief or exemptions may apply under Singapore law.
UK-Singapore DTAA: Key Terms Defined
Person
A "person" includes:
- An individual (natural person),
- A company (body corporate or entity treated as such for tax purposes),
- Any other body of persons (e.g., a trust or partnership, though partnerships themselves are generally not treated as “persons” under the treaty).
Tax Resident
A "resident of a Contracting State" refers to any person who, under that country’s domestic laws, is liable to tax due to:
- Domicile,
- Residence,
- Place of management or incorporation,
- Any similar criterion.
If an individual qualifies as a tax resident in both Singapore and the UK, tie-breaker rules apply (Article 4(2)):
- They are considered a resident where they have a permanent home.
- If they have homes in both countries, residency is based on where their personal and economic relations are closer (centre of vital interests).
- If unclear, further tests apply: habitual abode, nationality, or mutual agreement between tax authorities.
Permanent Establishment (PE)
A PE is a fixed place of business through which the business of an enterprise is wholly or partly carried on in the other country (Article 5). This includes:
- A place of management
- A branch or office
- A factory or workshop
- A mine, oil or gas well, or quarry
Construction or service projects in the other country can also create a PE if:
- They last more than 6 months (for construction), or
- Services are provided in aggregate for more than 6 months in any 12-month period.
Withholding Tax
Withholding tax is a tax deducted at the point of payment on certain cross-border income streams, such as dividends, interest, and royalties, before the funds are transferred to the non-resident recipient. It allows the source country to collect tax on income generated within its jurisdiction.
The UK–Singapore DTAA sets limits on the maximum withholding tax rates that each country may apply to these payments. This helps reduce the overall tax burden for non-residents and ensures that income is not taxed excessively in both countries. The treaty offers specific capped rates depending on the type of income and the status of the recipient. For instance, a reduced rate may apply if the recipient is a company that owns a substantial interest in the paying entity.
Understanding how these treaty provisions apply in practice requires knowledge of the Singapore withholding tax system, which explains the circumstances under which such taxes are imposed under local legislation.
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UK–Singapore DTAA: Tax on Business Profits
How business profits are taxed under the treaty
Under Article 7 of the Singapore–UK DTAA, business profits are taxed as follows:
- Profits are taxed only in the country of residence, unless the enterprise conducts business in the other country through a PE located there.
- If there is a PE, the source country may tax only the profits attributable to that PE.
This arrangement ensures income is taxed where substantial business activity occurs and avoids double taxation unless a real presence exists in both countries.
Practical Examples (Assuming S$500,000 Net Business Profit)
Example 1: Singapore company earning from the UK – No PE in the UK
- DTAA Rule: UK has no taxing rights (Article 7(1))
- Taxation: S$500,000 is taxed only in Singapore
- Withholding Tax: Not applicable
Example 2: Singapore company earning from the UK – With PE in the UK
- DTAA Rule: UK may tax profits attributable to the UK PE (Article 7(1), 7(2))
- Taxation: UK taxes S$300,000 attributable to the UK PE; Singapore taxes global income but allows a foreign tax credit
- UK Tax: S$75,000 (25% of S$300,000)
- Singapore Relief: S$75,000 credited against Singapore corporate tax
Example 3: UK company earning from Singapore – No PE in Singapore
- DTAA Rule: Singapore has no taxing rights (Article 7(1))
- Taxation: S$500,000 is taxed only in the UK
- Withholding Tax: Not applicable
Example 4: UK company earning from Singapore – With PE in Singapore
- DTAA Rule: Singapore may tax profits attributable to the Singapore PE (Article 7(1), 7(2))
- Taxation: Singapore taxes S$250,000 attributable to the PE; UK allows a foreign tax credit
- Singapore Tax: S$42,500 (17% of S$250,000)
- UK Relief: S$42,500 credit available against UK tax
UK–Singapore DTAA: Tax on Dividends
How dividends are taxed under the treaty
Under Article 10 of the Singapore–UK DTAA, dividend income may be taxed in both the country of residence and the source country. However, the source country’s taxing rights are limited by treaty rates, and the residence country provides relief through foreign tax credits.
Key Treaty Provisions
- General Rule: Dividends may be taxed in both the source and residence countries.
- Source Country Limitation: 5% withholding tax if the beneficial owner is a company owning at least 10% of the voting power in the payer; 15% in all other cases.
- Singapore Exception: Singapore does not impose withholding tax on dividends, provided they are paid out of after-tax profits (Article 10(3)).
Practical Examples (Assuming S$500,000 in Dividends)
Example 1: Dividends paid by a Singapore company to a UK resident
- DTAA Rule: UK may tax the dividend as the residence state (Article 10(1)). Singapore does not withhold tax unless its law changes (Article 10(3)).
- Taxation: S$500,000 is taxed only in the UK.
- Withholding Tax: None in Singapore.
- Example: The UK-resident recipient receives the full S$500,000. It is then taxed in the UK according to local law.
Example 2: Dividends paid by a UK company to a Singapore resident
- DTAA Rule: UK may impose withholding tax under Article 10(2). The rate is 5% if the Singapore recipient owns at least 10% of the voting rights, otherwise 15%.
- Taxation: The full dividend amount of S$500,000 is taxable in Singapore as foreign income.
- UK Withholding Tax: S$25,000 (5% of S$500,000), assuming the 10% ownership threshold is met.
- Net Received in Singapore: S$475,000 after UK withholding that is subject to further Singapore income tax.
- Relief: Singapore grants a foreign tax credit of S$25,000 under Article 23(2).
- Additional Credit: If the Singapore company owns at least 10% of the UK company, it may also claim credit for underlying UK corporate tax paid on the profits from which the dividend was paid.
UK–Singapore DTAA: Tax on Capital Gains
How capital gains are taxed under the treaty
Under Article 13 of the Singapore–UK DTAA, capital gains are generally taxed in the country of residence of the seller. However, specific exceptions allow the source country to tax certain gains, especially those related to real estate or permanent establishments.
Key Treaty Provisions
- Gains from immovable property (e.g. real estate) may be taxed in the country where the property is located (Article 13(1)).
- Gains from shares or interests deriving ≥75% of their value from immovable property in the other country may also be taxed there (Article 13(2)).
- Gains from movable property linked to a PE or fixed base may be taxed in the country where that PE or base is located (Article 13(3)).
- Gains from ships, aircraft, or containers used in international traffic are taxable only in the country of residence (Article 13(4)).
- All other capital gains are taxable only in the country of residence (Article 13(5)).
- Exit tax clause: A country may still tax gains from property disposed of by an individual who was a tax resident there at any time in the past 5 years (Article 13(6)).
Practical Examples (Assuming S$500,000 Capital Gain)
Example 1: Sale of UK shares by a Singapore resident
- DTAA Rule: Capital gains are taxable only in Singapore, unless the shares derive ≥75% of their value from UK real estate (Article 13(2), 13(5)).
- Taxation: If the UK shares are in a property-holding company, the UK may tax the gain. Otherwise, only Singapore can tax it.
- Example: A Singapore resident sells UK shares in a non-property company and earns S$500,000 in gain. The gain is taxed only in Singapore (currently exempt for individuals; taxed for companies).
Example 2: Sale of Singapore shares by a UK resident
- DTAA Rule: Capital gains are taxable only in the UK, unless the shares derive ≥75% of their value from Singapore real estate (Article 13(2), 13(5)).
- Taxation: If the shares are in a Singapore property-holding company, Singapore may tax the gain.
- Example: A UK resident sells shares in a Singapore tech company and earns S$500,000 in gain. The gain is taxed only in the UK. If the shares had derived most of their value from real estate in Singapore, Singapore could tax it.
UK–Singapore DTAA: Tax on Interest Income
How interest income is taxed under the treaty
Under Article 11 of the UK–Singapore DTAA, interest income may be taxed in both the country where the interest arises and the country of residence of the recipient. However, the source country’s right to tax is capped at a treaty-specified rate to avoid excessive double taxation.
Key Treaty Provisions
- General Rule: Interest is taxable in the recipient’s country of residence.
- Source Country Limitation: If the recipient is the beneficial owner, the source country may also tax the interest, but the rate must not exceed 10% of the gross amount.
- Government Exemption: Interest paid to certain government-owned entities (e.g. MAS, Bank of England) is exempt from source-country tax.
- PE and Fixed Base Exception: If the debt-claim is connected to a permanent establishment or fixed base, then Article 7 (Business Profits) or Article 14 (Independent Personal Services) applies instead.
- Non-arm’s-length Interest: If the interest amount is excessive due to special relationships between the parties, only the arm’s-length portion benefits from treaty protection. The excess may be taxed under local law.
Practical Examples (Assuming S$100,000 Interest Income)
Example 1: Interest paid by a Singapore company to a UK resident
- DTAA Rule: Singapore may tax the interest up to 10% if the UK recipient is the beneficial owner (Article 11(2)).
- Taxation: The full S$100,000 is taxable in the UK; Singapore withholds S$10,000 at source.
- Net Received: S$90,000
- Relief: The UK provides a foreign tax credit of S$10,000 against its domestic tax.
Example 2: Interest paid by a UK company to a Singapore resident
- DTAA Rule: UK may impose a 10% withholding tax if the Singapore recipient is the beneficial owner (Article 11(2)).
- Taxation: The full S$100,000 is taxable in Singapore; UK withholds S$10,000 at source.
- Net Received: S$90,000
- Relief: Singapore provides a foreign tax credit of S$10,000 under Article 23(2).
UK–Singapore DTAA: Tax on Royalties
How royalty income is taxed under the treaty
Under Article 12 of the UK–Singapore DTAA, royalties may be taxed in both the source country and the country of residence of the recipient. However, the treaty limits the source country’s withholding tax rate and provides relief from double taxation in the country of residence.
Key Treaty Provisions
- General Rule: Royalties are taxable in the recipient’s country of residence.
- Source Country Limitation: If the recipient is the beneficial owner, the source country may tax royalties up to 10% of the gross amount.
- PE and Fixed Base Exception: If the royalty income is connected to a permanent establishment or fixed base in the source country, then Article 7 (business profits) or Article 14 (independent services) applies instead.
- Non-arm’s-length Royalties: If royalties exceed the market rate due to special relationships, only the arm’s-length portion qualifies for treaty protection. The excess may be taxed under local law.
Practical Examples (Assuming S$100,000 Royalty Payment)
Example 1: Royalty paid by a Singapore company to a UK resident
- DTAA Rule: Singapore may impose up to 10% withholding tax (Article 12(2)) if the UK recipient is the beneficial owner.
- Taxation: The full S$100,000 is taxable in the UK; Singapore withholds S$10,000 at source.
- Net Received: S$90,000
- Relief: The UK grants a foreign tax credit of S$10,000 against domestic tax.
Example 2: Royalty paid by a UK company to a Singapore resident
- DTAA Rule: UK may impose up to 10% withholding tax (Article 12(2)) if the Singapore recipient is the beneficial owner.
- Taxation: The full S$100,000 is taxable in Singapore; UK withholds S$10,000 at source.
- Net Received: S$90,000
- Relief: Singapore grants a foreign tax credit of S$10,000 under Article 23(2).
UK–Singapore DTAA: Tax on Personal Services
How independent services are taxed under the treaty
Under Article 14 of the UK–Singapore DTAA, income from independent personal services (such as consulting, freelance, or professional work) is taxable only in the country of residence of the service provider, unless they have a fixed base in the other country or spend 183 days or more there in a 12-month period.
Key Treaty Provisions
- Income is taxable only in the country of residence of the individual performing the services.
- The source country may tax the income if:
- The individual has a fixed base regularly available in that country, or
- The individual is present in that country for 183 days or more in any 12-month period.
Practical Examples (Assuming S$120,000 in Consulting Income)
Example 1: UK consultant providing services to Singapore clients, without fixed base and visiting Singapore for fewer than 183 days
- DTAA Rule: Singapore may not tax the income (Article 14(1)).
- Taxation: The full S$120,000 is taxed only in the UK.
- Outcome: No tax is payable in Singapore. Singapore clients may pay the full amount gross, without withholding.
Example 2: UK consultant with a fixed base (e.g. office or rented desk) in Singapore, or stays over 183 days
- DTAA Rule: Singapore may tax the income attributable to the fixed base or time spent in Singapore (Article 14(1)).
- Taxation in Singapore: Assume S$120,000 is earned while based in Singapore. Tax at 22% non-resident rate applies which is S$26,400 tax withheld.
- Taxation in UK: Full income is also taxable in the UK. If taxed at 40%, UK tax would be S$48,000.
- Relief: The UK grants a foreign tax credit of S$26,400. Top-up tax in the UK = S$21,600.
- Net Received: S$93,600 after Singapore tax, with additional tax paid in the UK depending on relief applied.
How employment income is taxed under the treaty
Under Article 15 of the UK–Singapore DTAA, employment income is generally taxed in the country where the employment is exercised (i.e. where the work is physically performed). However, income is taxable only in the country of residence of the employee if specific conditions are met.
Key Treaty Provisions
Employment income is taxable in the country where the employee works, unless all of the following apply:
- The employee is present in the source country for no more than 183 days in a 12-month period.
- The employer is not a resident of the source country.
- The remuneration is not borne by a permanent establishment or fixed base in the source country.
Practical Examples (Assuming S$120,000 Salary)
Example 1: UK resident employed by a UK company and working temporarily in Singapore for less than 183 days
- DTAA Rule: Singapore may not tax the income (Article 15(2)).
- Taxation: Full S$120,000 is taxed only in the UK.
- Outcome: No tax is payable in Singapore if all three conditions are satisfied.
Example 2: UK resident employed by a UK company and working in Singapore for more than 183 days, or salary paid by a Singapore entity or PE
- DTAA Rule: Singapore may tax the employment income (Article 15(1)).
- Taxation in Singapore: Full S$120,000 taxed as income earned in Singapore. If non-resident, tax rate is 15% or resident progressive rates, whichever is higher.
- Assume flat 15% non-resident rate: S$18,000 tax withheld in Singapore.
- Taxation in UK: S$120,000 is also taxable in the UK. If the UK tax rate is 40%, total liability is S$48,000.
- Relief: The UK grants a foreign tax credit of S$18,000.
- UK top-up tax: S$30,000
- Net Received: S$102,000 after Singapore withholding, with additional tax due in the UK depending on relief.
UK–Singapore DTAA: Tax on Director Fee
How director fee is taxed under the treaty
Under Article 16 of the UK–Singapore DTAA, director’s fees and similar payments are taxable in the country where the company paying the fee is a resident. This reflects the principle that such income is closely tied to the management and governance of the company and should be taxed where that company operates.
Key Treaty Provisions
- The country where the paying company is resident has the right to tax director’s fees, regardless of where the director resides.
- Applies Only to Board Roles: This rule applies to individuals acting in their capacity as directors (board members), not general employees or consultants.
Practical Examples (Assuming S$100,000 Director’s Fee)
Example 1: Fee paid by a Singapore company to a UK resident
- DTAA Rule: Singapore may tax the director’s fee (Article 16).
- Taxation: S$100,000 is taxable in Singapore.
- Relief: The UK may also tax this amount under its domestic rules, but will grant a foreign tax credit for tax paid in Singapore to avoid double taxation.
Example 2: Fee paid by a UK company to a Singapore resident
- DTAA Rule: The UK may tax the director’s fee (Article 16).
- Taxation: S$100,000 is taxable in the UK.
- Relief: Singapore may also tax this income under its worldwide taxation regime, but will provide a foreign tax credit under Article 23(2).
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